From Ad Loads to Upfronts, the TV Industry Braces for Another Wild Ride in 2021

Where We Were As 2020 began, the television industry was focused on launching new streaming services to keep pace with Netflix while simultaneously trying to stop audiences from abandoning linear TV. A year later, everything has been transformed as a result of Covid-19. And yet, at the same time, nothing has really changed. Yes, the pandemic supercharged and compressed the industry’s evolution from several years into a few short months. But 2021 kicks off in a similar way as 2020 did: Those same companies are prioritizing their streaming services, in part to grab the audiences that fled linear TV during the pandemic. Initially, quarantining consumers watched more TV throughout multiple dayparts, but those new patterns changed as Covid-19 shut down live sports and paused television production. That throttled the linear TV content pipeline, pushing audiences toward streaming—and many never looked back. Meanwhile, companies such as NBCUniversal and ViacomCBS lost more than a quarter of their ad revenue in Q2 due to the Covid-19 fallout. Where We Are Now By summer, something astounding happened: The biggest media companies, reeling from their hefty ad revenue losses, joined the streaming stampede. NBCUniversal, WarnerMedia and Disney all radically reconfigured their organizations to put their streaming platforms at the center, leaving no question as to their priorities for the future. “Consumer behavior has shifted permanently,” explains Linda Yaccarino, chairman, global advertising and partnerships, NBCUniversal. As a result of her company’s overhaul, where executives now oversee content for multiple platforms, “it is perfectly organized to develop and distribute relevant content to them, no matter what the screen.” After all, Yaccarino says, “we can't transform the industry without transforming ourselves and our organization.” And the transformation has just begun. This year’s shifts in the television landscape might not be as seismic as those that occurred in 2020, but it will still be a wild ride. Where We're Going Most insiders are quietly looking to fall 2021 as the time when the industry will start to more fully emerge from the pandemic, assuming most people are able to get vaccinated by the summer. “By the third quarter, the underlying assumption there is that the vaccine will be sufficiently widely distributed and that something passing for normalcy returns,” says Brian Wieser, global president, business intelligence, GroupM. In GroupM’s global end-of-year forecast, the company said it expects the ailing travel and theatrical advertising categories to finally be back at full steam by then, capitalizing on pent-up demand. While GroupM forecasts that total TV advertising in the U.S. declined by 15.1% in 2020 (excluding political advertising) and will grow by 7.8% this year, national TV will see “tepid to negative” trends when normalcy returns, says Wieser, with a growing share of spending going to streaming platforms such as Roku and ad-supported streamers including Hulu and Pluto TV, which are “contributing to the erosion of traditional ad-supported television.” But digital extensions and related media, including advertising associated with traditional media companies’ streaming activities, will grow 23.2% this year (after a 7.8% increase in 2020), which further explains the shift to streaming. Streaming will transform linear TV, from content to ad loads The impact of last year’s streaming-centric media company reorganizations will be more fully felt in 2021, as the top-shelf scripted programming once earmarked for each company’s cable networks will now be almost completely funneled to their respective streaming platforms, like NBCUniversal’s Peacock, WarnerMedia’s HBO Max and ViacomCBS' Paramount+ (its upcoming rebranding of CBS All Access, which will now be the focus of its scripted efforts). The result will be that basic cable comes full circle to what it looked like two decades ago, when “it was not a bastion of scripted programming, quality and excellence," John Landgraf, chairman, FX Networks and FX Productions, told me last September. "What really launched that was The Shield [in 2002]." Since that time, more than 20 basic cable networks have tried their hands at original scripted series—and almost all of them have now exited the space, aside from AMC and FX (which, in addition to programming two networks, also creates shows exclusively for streaming via its FX on Hulu branded hub). “In some ways, it's a return to the days of old, when FX was kind of where it's at in quality scripted programming on basic cable,” said Landgraf. That basic cable scripted exodus could give consumers even less incentive to keep their subscriptions. But even if they don’t cut the cord (yet), audiences are less tolerant of cluttered linear ad loads after growing accustomed to ad-free environments on Netflix and Disney+, or “ad-light” streamers including Peacock and the new Discovery+, which feature just five minutes of ads per hour. “There’s not a lot of linear experiences where the advertising feels like it’s right-sized,” admits one ad sales chief, speaking anonymously to me. “The viewers’ mindset is really starting to get changed by watching streaming services.” Consumer behavior has shifted permanently.Linda Yaccarino, chairman, global advertising and partnerships, NBCUniversal That will in turn force networks to trim their ad loads or risk losing viewers. It’s already a priority for NBCUniversal, which announced plans last April to permanently reduce linear ads, accelerating its efforts to bring Peacock’s streaming innovations to its broadcast and cable networks. “NBCUniversal continues to whittle away at reducing commercial time, because it improves the viewer experience,” says Yaccarino. “I hope the industry will start prioritizing that as well.” Another NBCU ad priority for 2021: leaning into ecommerce, which Yaccarino calls “the next frontier” for TV advertising: “We are just starting to scratch the surface.” The upfronts will be upended again Last year’s upfront marketplace was unlike any other, as each company’s in-person events were canceled—some presentations went virtual; others were dropped entirely—and negotiations were conducted on a staggered time frame, with some talks taking place during the standard broadcast season (October-September) and others occurring on a calendar year upfront. While no decisions have been made yet, it’s likely this year’s upfronts will remain virtual. And the negotiations themselves will also be different. Several buyers and ad sales chiefs tell me they hope to move away from transacting on traditional age and gender demographics during this upfront. Wieser notes that the coveted adults 18-49 demo in prime time “represents around 4% of all TV impressions.” Buyers will also be pushing for more flexibility as they attempt to make upfront commitments in an ever-shifting landscape. And as the focus shifts to cross-platform upfront buys, publishers and marketers say they are eager for more agreement on measurement. Yaccarino says she’s "more optimistic than ever" that the industry will finally solve the measurement conundrum it has grappled with for years: “That’s a lot of activity in that area, and we’re going to get there.” Shaking up the upfront strategy could yield other positive results for the industry this year as well. After all, says Wieser, “If you have to rethink this thing you’ve been focused on, you start to open your mind up to other possibilities.” Check out all of our 2021 Outlook coverage here.

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From Ad Loads to Upfronts, the TV Industry Braces for Another Wild Ride in 2021

‘Something passing for normalcy’ beckons, but the streaming migration will transform television

Where We Were

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